Australia's 'backpacker tax' ruled illegal by court

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About 150,000 foreigners travel to Australia annually on working holiday visas

Australia has used a so-called “backpacker tax” to illegally tax foreign workers from eight countries, according to a landmark ruling.

In 2017, the government imposed a controversial 15% tax rate on two visa categories for working holiday-makers.

But a court on Wednesday found the levy was in breach of existing treaties with the UK, US, Germany, Finland, Chile, Japan, Norway and Turkey.

Tens of thousands of foreign nationals may be owed money, local media said.

The Australian Tax Office said it was considering whether to appeal against the ruling.

The levy was challenged by an international tax company on behalf of a British tourist, Catherine Addy, who worked as a waitress in Sydney in 2016.

About 150,000 foreigners travel to Australia every year on working holiday visas, with many finding work in the farming and hospitality industries.

What did the court find?

The Federal Court of Australia said the tax could not be applied to citizens of those eight countries who had been employed on category 417 or 462 visas.

  • How the tax was imposed after controversy

This was due to treaties which required Australia to tax those foreign nationals in the same way as local workers.

Unlike foreign workers in Australia, locals do not pay any tax until their yearly income exceeds A$18,200 (£15,700; $23,400).

In his ruling, Justice John Logan described the tax as “a disguised form of discrimination based on nationality”.

It may force the government to repay hundreds of millions of dollars in total, local media reported.

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